Specialised investment funds
The principle characteristics of the specialised investment fund (SIF) are the lack of any constraints on the type of assets in which it can invest and a lighter supervisory regime.
Since it may invest in any type of assets, the SIF is suitable for establishing anything from a traditional securities or money market fund to the creation of a real-estate fund, hedge fund or private equity fund. The SIF must have active portfolio management.
Given the relative lack of investor protection offered, SIFs are not designed for the general public but for sophisticated investors looking for maximum flexibility in order to give scope to their expertise and their specific needs.
By “sophisticated investors” the law means institutional and professional investors, and any other person who can provide written assurance that he or she is a qualified investor and has either a minimum of 125,000 euros to invest, or an attestation from a bank, investment company or management company to certify that he or she has the necessary knowledge and experience to evaluate an investment in the SIF.
Specialised funds have less strict publication obligations than funds destined for the general public and benefit from more flexible regulation of their activity. They are, however, obliged to put in place an effective system to monitor, measure and manage portfolio investment risk. They must also be structured so as to limit as far as possible the risk of conflicts of interest between the fund and its investors. There are also several conditions attached to the delegation of tasks to third parties.
Like funds designed for the general public, the SIF must respect the principal of risk diversification, but the law does not set any quantitative limits on the fund’s investments.
SIFs can be created as multiple compartment funds. They can issue an unlimited number of different share classes, which allows each fund and sub-fund to be designed to the needs and preferences of particular target investors.
The SIF does not require a promoter. However, like other Luxembourg regulated investment vehicles it is authorised and supervised by the CSSF.